If you are interested in cashing in on First Community Bancshares Inc’s (NASDAQ:FCBC) upcoming dividend of US$0.21 per share, you only have 4 days left to buy the shares before its ex-dividend date, 01 November 2018, in time for dividends payable on the 16 November 2018. Is this future income a persuasive enough catalyst for investors to think about First Community Bancshares as an investment today? Below, I’m going to look at the latest data and analyze the stock and its dividend property in further detail.
Here’s how I find good dividend stocks
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is their annual yield among the top 25% of dividend payers?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has dividend per share amount increased over the past?
- Does earnings amply cover its dividend payments?
- Will it be able to continue to payout at the current rate in the future?
How well does First Community Bancshares fit our criteria?
The current trailing twelve-month payout ratio for the stock is 46%, which means that the dividend is covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.
When considering the sustainability of dividends, it is also worth checking the cash flow of a company. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.
If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. Not only have dividend payouts from First Community Bancshares fallen over the past 10 years, it has also been highly volatile during this time, with drops of over 25% in some years. These characteristics do not bode well for income investors seeking reliable stream of dividends.
Relative to peers, First Community Bancshares has a yield of 2.5%, which is on the low-side for Banks stocks.
After digging a little deeper into First Community Bancshares’s yield, it’s easy to see why you should be cautious investing in the company just for the dividend. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. Below, I’ve compiled three fundamental factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for FCBC’s future growth? Take a look at our free research report of analyst consensus for FCBC’s outlook.
- Valuation: What is FCBC worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether FCBC is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.